Monday, June 22, 2009

AI must cut staff, perks for bailout

The government wants Air India (AI) to scrap its performance-linked incentive (PLI) scheme and cut the number of staff per aircraft as pre-conditions for bailing out the national carrier reeling under a mounting debt burden, according to a senior official.

AI should downsize or increase the number of planes in operation, said the official who didn’t want either himself or his department to be named given the sensitivity of the issue.

“When we ask them to freeze the PLI, they say there is an agreement with employee unions which stops them from doing so. These agreements cannot be honoured if the company turns sick,” he said citing the example of Singapore Airlines staff, which took a voluntary salary cut during the recent SARS outbreak.

AI has also been advised to take a relook at its aircraft delivery schedule for Boeing and Airbus planes, given the market scenario. Further expansion of capacity at this stage will only lead to more losses, the government feels.

PLI is a major component of the compensation package of 31,000 AI employees. AI pays around Rs 1,400 crore as PLI annually out of its total wage bill of Rs 3,000 crore. AI employs 230 people per aircraft as against 130 employees in the case of IndiGo.

“We have been sending Air India’s bailout plan to the finance ministry, but so far, they have not been convinced,” the official said.

AI is reported to have sought Rs 14,000 crore from the government in terms of equity, soft loans and grants. The newly-appointed AI CMD, Arvind Jadhav, however, denied the figure.

An official in the ministry of civil aviation said the airline is yet to give a formal proposal for financial help to the government. Asked about the quantum of financial assistance the official said: “Air India has a cumulative loss of about Rs 5,300 crore.”

A senior AI official blamed the merger of erstwhile Indian Airlines and AI, the creation of special business units (SBUs) and high fuel prices for the current state of the airline.

Meanwhile, doubts are being raised on the possibility of any financial help for the national carrier in the forthcoming Budget.

“We are still discussing the cash requirement of Air India. It looks certain now that the proposal will not find its way in the Budget. The gross budgetary support (GBS) figure for 2009-10 has already been worked out,” said another official who also did not wish to be identified.

Faced with a severe liquidity crunch, AI recently issued a circular to its employees deferring June salary and PLI by 15 days. It also asked its officers at the general-manager level and above to voluntarily forego their July salaries. Various employee unions of the airline have protested against the move and demanded salaries on time.

The domestic airline industry is estimated to have lost Rs 10,000 crore in 2008-09, mainly on account of high fuel prices, excess capacity, poor load factor and irrational pricing.